Free to Choose Chapter 6: What's Wrong with Our Schools - Higher Education and Obstacles

In Part 1, we saw how American schools started private, got taken over by government, and slowly became bloated bureaucracies that serve themselves more than students. Friedman proposed a voucher plan – give parents the money and let them choose where to send their kids. Simple idea. But if it is so simple, why has it not happened? And what about colleges and universities – are they suffering from the same disease?

This is post 10 in my Free to Choose retelling series. This is Part 2 of Chapter 6. If you missed Part 1, start there.

Why the Voucher Plan Keeps Getting Blocked

The voucher idea has been around since the 1950s. Over the decades, support has grown. Organizations endorsed it. The federal government offered to fund experiments. Constitutional amendments were proposed in Michigan and California. Bills for tuition tax credits nearly passed at the federal level. And yet, every time the idea gets close to reality, it gets crushed.

Who crushes it? The educational bureaucracy. Teachers’ unions, school administrators, superintendents – the people whose jobs and power depend on the current system. Friedman says their self-interest is the single biggest obstacle.

A black educator named Kenneth B. Clark summed it up bluntly. Public schools are protected monopolies. They face almost no real competition. As long as they keep getting state and federal money without any accountability, there is no reason to expect them to improve. A monopoly does not need to care about quality. It just needs to keep its funding.

The evidence backs Clark up. When the federal government tried to fund voucher experiments in the 1970s, promising plans were developed in many communities. But one after another, local superintendents and education officials talked their communities out of participating. In New Hampshire, the state board of education chairman had everything ready – federal money, detailed plans, community agreements. Then, one by one, every community was persuaded by local education leaders to back out. The whole thing collapsed.

The One Experiment That Almost Worked

Only one voucher experiment actually happened – in Alum Rock, California. And even that was hobbled from the start. It was limited to a few public schools. No private schools were allowed. Parents could not add their own money. A handful of “mini-schools” were set up within the existing system, each with a different curriculum. For three years, parents got to choose which mini-school their child attended.

Even this small taste of choice produced results. Teachers, for the first time, had real power to design their own curriculum. Parents got more involved. One school, McCollam, jumped from thirteenth place in its district to second place in test scores.

Then the experiment was shut down. The educational establishment ended it – just like it ended Harlem Prep and every other initiative that threatened the monopoly.

The same pattern repeated in England. A group called FEVER tried for four years to introduce a voucher experiment in Kent. Local government leaders were open to it. The teachers’ union blocked it. One headmaster, Dennis Gee, said the quiet part out loud: he did not want parents having power over what schools teach. He believed teachers and bureaucrats should make those decisions, not parents. Parents, in his view, do not know what is best educationally for their children.

A local parent named Maurice Walton saw things very differently. Under the current system, he said, parents have no real choice at all. Teachers hold all the power. If you complain, the teacher can tell you “tough luck.” Vouchers would flip the power dynamic – and that, Walton argued, was exactly why teachers opposed them.

The Problem with College Subsidies

Now Friedman turns to higher education, and his argument here might be even more uncomfortable than his case against public schools.

The problems with colleges are similar – quality and fairness. But there is one key difference. Nobody is forced to attend college. Students choose where to go. That freedom of choice helps with quality but makes the fairness problem worse.

At government-funded colleges and universities, tuition is kept low through taxpayer subsidies. This sounds generous. But it creates a strange environment. Low tuition attracts many students who are not particularly interested in learning. They come because it is cheap, their friends are there, and college is a pleasant break between high school and real life. Attending class is just the price they pay for the social experience.

The result? At UCLA, one of the best state universities in the country, only about half of enrolled students finished their degrees. At Dartmouth, a private college where students paid the full cost of their education, 95 percent finished. When you are paying thirty-five dollars per lecture, as one Dartmouth student calculated, you make very sure you show up.

At government universities, professors are not rewarded for good teaching. They advance by publishing research and winning grants. Administrators advance by getting bigger budgets from the state legislature. The famous state universities are known for their graduate programs, their research labs, and their football teams – not for excellent undergraduate teaching. The incentives point away from the students.

Private colleges are different. Students are the primary customers. They are paying for what they get and they want their money’s worth. If the school does not deliver, they go elsewhere. That simple market pressure keeps quality high.

Who Really Pays, Who Really Benefits

Here is where Friedman delivers his sharpest criticism. The standard argument for taxpayer-funded higher education goes like this: college produces “social benefits” beyond what individual students gain, so society should share the cost.

Friedman once believed this argument. He stopped believing it after trying to get its supporters to name specific social benefits. The answers were almost always bad economics. Yes, trained workers raise national productivity. Yes, educated people contribute to economic growth. But these are benefits that graduates capture through higher earnings. They have a personal incentive to get the education. You would not use the same logic to argue that taxpayers should subsidize General Motors’ factories – even though factories also raise national productivity.

But the real scandal is not the theory. It is who actually benefits from the subsidies. Studies from Florida and California showed something remarkable. Government spending on higher education transfers wealth from lower-income families to upper-income families. In Florida, only the top income group got back more than they paid in taxes. The bottom two income groups paid 40 percent more in taxes than they received in educational benefits. In California, families with children at the University of California had the highest average incomes and received the largest net benefits. Families without children in public higher education had the lowest incomes and bore a net cost of over 8 percent of their income.

Think about what this means. A janitor or a waitress pays taxes that subsidize the college education of a doctor’s or lawyer’s children. The janitor’s own kids are less likely to attend college at all, and if they do, they go to cheaper community colleges for shorter periods. The system advertises itself as promoting equal opportunity. In practice, it does the opposite.

Friedman calls this the clearest example of what economists call “Director’s Law” – the idea that government programs, no matter how they are sold to the public, end up benefiting the middle and upper classes at the expense of the poor. The middle class, he says, has convinced the poor to subsidize them on a massive scale. And instead of feeling ashamed, they boast about their generosity.

If you have followed the student debt debates of recent years – who holds the most debt, who benefits most from loan forgiveness proposals, who actually attended the expensive four-year universities – you can see that this argument has not gotten any less relevant.

Friedman’s Alternatives for Higher Education

Friedman proposes two approaches.

The first and more radical idea is what he calls “equity” financing. Instead of fixed-dollar loans, the government would invest in a student the way an investor buys a share in a business. The student receives funding for education and, in return, agrees to pay back a percentage of future earnings above a certain threshold. Graduates who earn a lot pay back more. Graduates who earn little pay back less or nothing. The system funds itself over time.

This idea was studied seriously. A presidential panel in 1967 recommended a version of it called the “Educational Opportunity Bank.” Some universities, including Yale, experimented with contingent-repayment plans. But the educational establishment fought it – because it threatened the subsidy system that benefited them.

The second, less radical idea is a voucher plan for higher education. Instead of giving money to government universities, divide the total higher education budget by the number of students to be subsidized and give each student a voucher. Let them use it at any accredited institution – public, private, religious, or secular. Make government universities charge full tuition and compete on equal terms with everyone else.

Friedman points out the absurdity of the current arrangement. A state like Ohio will hand you a generous four-year scholarship – but only if you attend a state university. Choose a private college like Oberlin or a nationally renowned school like Harvard, and you get nothing. How is that fair? Why should the state pick winners among schools instead of letting students decide?

The Irony of Government Regulation

There is a final twist that Friedman finds almost too perfect. As the federal government poured more money into higher education, it also demanded more control. Regulations multiplied. Bureaucrats from the Department of Health, Education, and Welfare began dictating policies to colleges and universities in the name of “affirmative action” and civil rights.

The academic community was outraged. Professors and administrators complained bitterly about government interference with their mission and independence.

But here is the irony. For decades, the academic community had been the loudest voice supporting exactly this kind of government intervention – when it was directed at other industries. They praised regulation of businesses, banks, and hospitals. They only discovered that regulation is costly, counterproductive, and interferes with primary missions when the regulators turned their attention to universities. They became victims of their own philosophy and their own dependence on government money. You cannot feed at the government trough and then complain about the farmer’s rules.

Key Takeaway

The voucher plan for schools keeps getting blocked – not because it would fail, but because the people with the most to lose are the ones with the most political power. Teachers’ unions and school administrators fight every experiment, and the few experiments that do happen get shut down before they can prove anything. Meanwhile, government subsidies for higher education do the opposite of what they promise. They transfer wealth upward, from working families who never attend college to wealthier families who do. Friedman’s alternatives – equity financing and vouchers for higher education – would make the system fairer and more efficient. But the institutions that benefit from the current arrangement have every reason to fight change. The pattern is always the same: programs sold as helping the poor end up serving the powerful, and the powerful make sure the programs never change.

Book: Free to Choose by Milton and Rose Friedman | ISBN: 978-0-15-633460-0

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